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Taylor Schulte:
Welcome to another episode of the Stay Wealthy Retirement Show. I’m your host, Taylor Schulte, and every week I tackle the most important financial topics to help you stay wealthy in retirement. And now onto the episode.

Hal, welcome to the show. Thank you so much for being here.

Hal Hershfield:
Thanks, Taylor. I’m looking forward to the conversation.

Taylor Schulte:
Hal, your research sits, at least in my opinion, at this fascinating intersection of psychology and financial decision making. So I’d love to start by hearing what got you interested in studying how people think about what you call their future selves and what ultimately pulled you toward financial and retirement planning specifically.

Hal Hershfield:
I’ll go way back, but I’ll make it quick. This college told you something about my age, but when I was a kid, we had the world book encyclopedia, the hardcover books. Okay, I’m glad you recognize what I’m talking about. And I don’t know why, but I was fascinated with the money article and the M book. So if you opened up the M book, it would just open to money. I love looking at the different currencies and everything. So I would say that was my very first interest. But the larger one was that when I was in graduate school, I had had a conversation with my advisor about long-term decision-making. That’s really what I was there to study. I thought it was going to be more about life decisions. That was what I wanted to be interested in. And Laura Carstensen, that was my advisor. She had said, retirement is such an important issue that nobody from the psychology side is talking about and we should talk about it.

And this was only a couple years before the financial crisis of 2008 and nine. And the sort of swirl of that conversation and then what ended up happening out in the markets and the world really created this interest in trying to better understand what’s happening in individual investors’ heads, what’s happening in terms of the psychology of long-term decision making for one, but also just general financial decisions because so much of it is human and psychological and I wanted to try to understand it and then help people with that knowledge.

Taylor Schulte:
And maybe while we’re touching on your background here, maybe share how you ended up as a professor at UCLA and what you do there at that college and also as a consultant for one of the fastest growing evidence-based investment firms. How did you end up

Hal Hershfield:
There? This is one of those things where it’s like, I love to tell you I had this plan and it was going to go this path. And my plan was that I was going to become a psychology professor. And when I was finishing my degree, my girlfriend, now my wife had her own interview in Chicago and I didn’t have any prospects there. And one of my own professors said, “There’s a program at Northwestern that’s designed to train psych PhDs to become business school professors.” And I applied for it and I was really fortunate to get it. And I like to say I’d probably end up here if it weren’t for that, but that really set me on this path of trying to be more in the business school world. It trained me to think not just about interesting theoretical questions, but also how you apply them.

And it kind of furthered my interest and practice of studying these psychological concepts in the financial decisions making space. I kept at that. I got my first job at NYU and then pretty quickly thereafter moved to UCLA. My wife is from here, which was amazing. And the group here is phenomenal. I love my colleagues and everybody studies important sort of real world problems. And I’m at the business school and so I study, I teach MBAs, but part of the advantage of this is that it allows for a much easier connection to the quote unquote real world, to the firms who are actually sort of in the trenches looking at consumers. And several years ago, 2019, I got this sort of random email from this guy, Phil McKinnis and he said, “I’m in the process of joining this firm Avantis.

We’ve spun off of another firm and we think it might be valuable to have an academic perspective and we’re reaching out to a couple of academics. And so I’ll take a call.” This is one of those cases where it’s like sometimes you get a random email and thank goodness I answered it. And I started doing some writing for them and I quickly realized, man, this is a really interesting firm because they are evidence-based. They’re deeply entrenched in the academic literature, but not just the hardcore finance, also the psychological consumer behavior side of the equation, which is extremely important. And so that was sort of the connection there.

Taylor Schulte:
So fast forward a few years after you received that email and I think it was 2023, you wrote a book titled Your Future Self: How to Make Tomorrow Better Today. And the foundational idea that you found through your work, at least as I understand it, is that most people experience their future self almost like a stranger. And before maybe we get into the consequences of that, I’m just curious, is that necessarily always a problem? Is it always a problem that your future self feels like a stranger? And is the goal to completely close that gap or is there something more nuanced going on for us to better understand?

Hal Hershfield:
I love that. It’s a very deep question you’re asking that you’re right. The gist of that book and a lot of my research is that people experience their future selves to be like others. And I want to just highlight that. I think that’s nuanced there because you brought up the concept of stranger and to be fair, that’s where I originally started this research. And the reality is I think most people experience their future self to be like another person now that could be a stranger or could be someone who I’m a litle bit more emotionally connected to. Now to your question about is it always a problem if my future self is a stranger, I don’t think so. In fact, there’s one interesting research study that found that people are more likely to donate to others today if they’re relatively disconnected from their future self.

It’s kind of like if I had to choose, if I had a finite amount of money or resources and I had to decide, do I put that money toward myself in the future or a charitable organization or someone in need now, if I’m not all that emotionally invested in my future self, it’s a much easier decision to give it to somebody else. So I think that is at least one instance where having the disconnect may actually be advantageous from a charitable philanthropic perspective.

Taylor Schulte:
Now do they do that at the sacrifice of their own financial wellbeing?

Hal Hershfield:
Another great question there because that’s something that we don’t know because you could imagine it doesn’t have to be a fixed pie scenario. It doesn’t have to be all or nothing. So I could decide to put all of my money toward myself, I could put all of it towards somebody else, or I could say, “Well, I’d like to have some split there,” which I think in the real world in everyday life, that’s more of what happens. But I think that particular research paper was more, I believe, trying to make a point rather than say, “This is what happens generally speaking.” But the implication of this is that there can be some really interesting questions surrounding how we think about our savings over time. How do we think about using it for ourselves, giving it to our offspring, giving it to charitable organizations with which we might feel some connection.
And you can easily imagine how my own relationship with my future self and with future others might play into that sort of decision.

Taylor Schulte:
It’s so interesting to me because we often find that, I say often, but it does come up regularly that people, clients are charitably inclined. They like the idea of giving to charity, but you’ll get the response like, “I want to make sure that my plan is intact, that is bulletproof, that I’m set before I even consider giving to charity.” And on the flip side of that is it’s really hard for people to feel like they have enough. Sometimes people never feel like they have enough. Even if they’ve got five, 10, 50, $20 million, they still don’t feel like they have enough. So they never feel like they’re at this point where they can give to charity, even though they are charitably inclined. It’s just a really challenging situation. We try to give our clients confidence that their plan is healthy and they have the ability, they have the extra money to give away if they want to, but it’s still challenging.

Hal Hershfield:
A lot of what we study in my field is we call them decision-making biases. And what’s really interesting is that I think that’s kind of a misnomer because oftentimes we’re oriented to make a decision in a certain way and it could be rational, but what happens is we sort of overapply it. So in other words, in this particular case, I think it’s quite rational. It makes sense to say, I want to make sure I’m taken care of first. It’s like the cheesy, put on your own oxygen mask before you put on someone else’s. You can’t help others if you yourself are vulnerable. But where this becomes interesting is it’s almost the example that you brought up is almost an over-application of that principle. It’s like, I need to make sure I’m okay before I give to others. Great. Perfect, makes sense. I agree. But then if I can never fully decide that I’m okay, now I get in a situation where I can never give to others when in fact others might really actually benefit now and I might benefit from seeing that my wealth is being given to others.

I don’t know if it’s a classic expression, but it’s one I’ve heard a lot better to give with a warm hand than a cold one. And it’s like in my own case, my grandmother, not that she had a massive wealth accumulated, but she did give what she was going to give while she was still alive so she could see her grandchildren and great-grandchildren benefit while she was still able to enjoy it. And boy, did that give her enjoyment.

Taylor Schulte:
So maybe going a layer deeper here, someone spends 30 or 40 years protecting some future version of themselves, they eventually retire and in a sense they become the person that they were saving for all along. But does that future self ever actually arrive or is it just this continuous moving target? Isn’t there always this older version of yourself further down the road who still feels like they need to be protected?

Hal Hershfield:
Yeah. I mean, so let me go back a step before I go deeper, which is the basic idea here is that if my future self is another person, then when it comes to all of these decisions we’re talking about, whether it’s saving for the future or spending for the future, whatever the decision is, what really matters is that relationship I have with that future self. I know we were sort of hinting at that earlier, but to really bring it home, if I have no emotional connection to my future self, it’s going to be hard to really step into their shoes and think about that space. If on the other hand, I have a strong connection, then it might be easier to say, “You know what? It makes sense to put aside more money. It makes sense to, for instance, cut back on eating certain foods so that I’m healthier.” You can think about any sort of trade-off between now and later and when I have a strong connection to my future self, then it can actually be easier to at least reason through these trade-offs and be a litle bit more intentional about them.

Now you brought up this fascinating idea of, well, let’s say that I’m fairly connected and I’ve done a quote-unquote good job of saving for 30, 40 years. I’ve kind of arrived at my … The future is now now. I’ve now arrived at that future self. Well, I think first off, we should appreciate that there’s always another future stuff. It’s not like now you’re here. You could imagine that you’ve been saving for your career, now you’re in your 60s, you’ve retired, but with any luck, you still have a decent amount of time to spend that money to decumulate. And there’s different stages of retirement, of course. I love financial advisors always talk about the go- go years, the slow-go years, the no-go years, and those are different future selves too and they’re different future selves for whom I can prepare differently. So when I’ve just arrived at retirement, hopefully the next five to 10 years look like that go- go period of I’m doing things, I’m traveling, I’m playing, I’m with my grandkids, these are the traditional ideas.

And then there’s also going to be a period of time where I’m slowing down a little bit and that’s a future self I need to prepare for. So while I would say yes, we may have arrived at a given future self, we can’t take our eyes off of the fact that there’s another future self down the line. And also what’s the point of all of this if you’re constantly preparing for a future? What’s the point of living? What’s the point of saving if you’re always looking ahead? I think part of the idea here is that you’re enjoying in the present too. And I mean that all along the pathway, not just when you’ve arrived at retirement. I mean, this is a little bit sort of stripped down in a overly simplified way, but you could imagine the scenario of someone who’s saving so much that they’re not going on trips with their family along the way because they’ve done the math and they realize that the cost of this trip, if I were to just invest that money, look how much more could result in when I’m retired.

But interestingly, that decision to not spend, that also is bad for your future self. It robs your future self of memories that could have been created. When you think about when you get to spend time with your family, when it’s easier to make plans, when your kids are younger, et cetera, those are times where it might make sense to spend so that your future self has memories later. But also if that didn’t happen, it’s easy to correct for. You can start doing it now. You can start creating those experiences now when you’ve become that future self in retirement. I know I threw a lot of things out there just now.

Taylor Schulte:
Something hit me as you’re talking through that. Has there been any research or work done on different generations and their connection to their future self? The baby boomer generation, do they view their future self differently than millennials or Gen X or Gen Y?

Hal Hershfield:
Just a great question. I mean, not in the way that I would want. In other words, we’ve done research looking at people across the lifespan. So you could say, okay, how are boomers connected to their future self relative to Gen X, to millennials, Gen Z, et cetera? However, to really make any of those statements about generational differences, what you want to do is track people over time because in other words, right now, somebody who’s 70 and a boomer could differ from someone who’s in their late 40s and Gen X, but we don’t know if those differences are because of generational cultural differences or it’s just what happens when you turn 70. And so you’d ideally like to track those who were in their late 40s into their late 60s and 70s and say, “Oh, there’s something special about Gen X.” Nobody actually cares about Gen X.

I’m just trying to get a little bit of attention to myself out there, but look at millennials and track them. Do they go through changes and look like boomers later on or do they have some special sort of characteristics that are there because they’re millennials, because they grew into the world around the 09 financial crisis and then started raising children around COVID.

And those are cultural moments that fundamentally change the way people view the future. I personally would not be surprised if there are robust differences there because it gets baked into you, those shaped things in the same way that we know anecdotally, and I’m sure there’s data on this too, although I just don’t know of it, we know that people, the silent generation who lived through the Great Depression, they act differently or acted differently. Many of them are quite old and have passed, but the ones who are still around, you see that. There’s a scrimping and saving that almost looks ridiculous to somebody who’s younger, but it wouldn’t look ridiculous if you had gone through the Great Depression.

Taylor Schulte:
Maybe we should have covered this earlier, but I’m curious, when you were initially doing this work on your future self and writing this book, was there a certain, I don’t know, time period of this future self? Imagine yourself 20 years from now, 30 years from now, 40 years from now. I mean, your future self could be tomorrow or this afternoon or next year. So when you’re initially doing this research, how were you thinking about the future self? Was this that distant 30-year future?

Hal Hershfield:
Yeah. I mean, when I initially started working on this, I had been thinking about the future self that exists in retirement, which to the extent that I was more or less focused on younger to middle-aged adult, that is a pretty distant future self. Now that said, I started becoming interested in a closer future self, so fears down the line. And even frankly, as you mentioned, there can be a future self tomorrow, and that’s very important, especially when it comes to little decisions that add up. If I eat late at night, I won’t sleep as well.

Over time, yeah, that’ll affect me in five years, but really that’s going to affect me tomorrow. And so I also have to get into his head and see the world through his eyes. But I think a bigger thing that happened that really shifted my focus here is the period of COVID and the pandemic really highlighted the fact that the future is inherently uncertain. That’s always been true, but I think that concept has kind of gotten supercharged and especially now with the rapid advances with AI, there’s so many things we just don’t know and can’t even make predictions about for the future. And so while I am still very interested in the period of retirement and the period of decummulation, how do you spend your money once you’re in retirement, sometimes it’s almost easier to anchor onto a future self that exists in a couple of years time and then use that as scaffolding to eventually build up to the one that exists in 20, 30 years and so on.

But I would say my interest has changed a bit. And also, I’ll just say one last thing, I started this work before I had kids. Now I have kids. My kids are 10 and almost seven and it is really difficult to picture them in five years, let alone 20. Whereas before I started this work, I would think about my own life and the lives of my parents and others in 20, 30-year increments, it’s just become increasingly difficult even for me to do that. And so I like to bring it a litle bit closer to home.

Taylor Schulte:
Yeah, it’s funny. This is not close by any means, but I was thinking about my 50th birthday, this next milestone birthday for myself. And then I did the math. I’m like, oh my gosh, my son’s going to be 18 when I turn 50. And I’m like, I don’t know how to think about this kid being 18 years old and not living with us and off in college. And it’s really hard to wrap your head around.

Hal Hershfield:
It is. But this also brings up a really interesting point, which is that when I first started my research on future selves, I mean, understandably I was thinking about individual investors, individual savers and their lives and the future and that sort of connection between present and future self, but you just can’t ignore that the self includes others in it. And I think that becomes especially true as you go through life. Whether you have a spouse or kids or not, other people start becoming part of this smaller and smaller circle and 50 is my next milestone too. And the idea of thinking about how old my kids will be and what they’ll be like then, it’s such a challenging mental exercise and it’s one that highlights that when I think about my future self, I’m not just thinking about me anymore. It’s like, what are the other changes in my family and in the world and in myself?

Taylor Schulte:
So I’m jumping around a little bit here. We’ll go back to retirement planning. You’ve written about something called projection bias, which in short is this tendency to project how we feel right now onto this future self. I’d love for you to talk to us about how that might show up in retirement planning and why it could be particularly dangerous for people who are making big irreversible decisions oftentimes like choosing their retirement date or choosing when to claim social security, which is actually our last conversation together, or whether to downsize their hole in these big irreversible decisions. Maybe just talk to us about how that projection bias shows up in retirement planning.

Hal Hershfield:
Sure. So I mean, you hit the nail on the head in terms of what it is, but just to clarify, it’s really when I am basically taking the current state that I’m in and projecting that or my current feelings, I’m projecting that onto my future self. And on the surface, it can look like, okay, well, that’s a good idea. You’re at least starting with some reasonable anchor point. But here, let me just give you an analogy. If I said to you, okay, or if you said to me, “My wife’s birthday’s coming up in July,” you said, “Well, let’s try to think about a good gift to buy her.” I said, “Well, I am really interested in getting,” this is going to be the most middle-aged male thing to say, but I’m really interested in getting an electric smoker.

Now, my wife and I are really close. We have a lot of similarities. I want a smoker. Why shouldn’t she? And now I think right away, you don’t know her, but I can tell you she doesn’t and that’s a form of projection bias. I’m taking my interest and I’m applying to someone else in a way that’s unfair because what I’m not doing there is thinking through what are her interests. Now, I said that to basically give an analogy. I could say what I really like doing right now is let’s think I really love being active. I love going on trips and I think my future self will want to do that too. Well, no, maybe he will, but have I really thought through what that means for him? Or if I say, “You know what? The downsizing conversation is great. I need space right now, but I think that my … ” Well, here, I guess that’s not really downsizing.

I could say, “I love to have a big house right now and I assume my future self will too and I’m going to want to keep that house.” I mean, this is interesting because maybe he will, maybe he won’t. The reverse of this is also really fascinating if I say, “Well,” and this is what we would call discounting, I need space right now, but I assume in the future it won’t be as important to me. So I’ll be okay to make sure that some of the money I get in retirement is from the sale of my house and will downsize. Now that’s also unfair because what I’ve done there is say my future self won’t care as much. And one of the things that we know from the data is that retirees are just as likely to downsize as they are to move to a house that’s as large or bigger, or at least that’s from a couple years ago. So I should double-check if that data point is still relevant, but you can quickly see how in either case, whether I’m projecting my feelings onto my future self or I’m downplaying his feelings, I may not really step into his shoes and we can’t know.

Let’s just be clear, there’s no crystal ball. We can’t know exactly what our future selves will want, but what we can do is create a deeper decision-making process where we try to reason through what would it mean for that guy, that version of me, if I do downsize, what would it mean if I don’t? What are the other implications of this? What sort of things might I want to do or not? And on this note, I think it’s a really important conversation to have with yourself and your spouse and your advisor to go deeper than the surface. I was talking to a friend the other day who said, “I told my advisor I want to golf in retirement.” And he said, “What my advisor didn’t ask me is, does that mean you want to go to your local free course once a month or are you planning to go to Augusta?” There are very different spending habits that’ll happen depending on the type of golf that you want.

And that’s a dumb classic golf example. But the point here is that if I just say, “Oh, I want to travel,” does that mean you want to go on a road trip to a national park or do you want to fly to Europe? Those are very different implications for your spending decisions and also your saving, but assuming that you’ve arrived with some money, how am I going to draw that money down? What will I be doing with it? Who will I be spending it with and so on there?

Taylor Schulte:
Yeah. I mean, I can see, again, people sacrificing the current version of themselves, sacrificing living in the moment because they believe right now that this future person, this future self of theirs is going to want to spend all this money and travel extravagantly. And so let’s squirrel it away and not spend it now so that future person can enjoy it. And I know you’ve done a lot of work focused on this savings challenge and not saving enough and how you can save more, but you’ve also written about the opposite that if you’re too future focused, you don’t live in the moment and you end up with this pile of money that you don’t know how to spend. Sometimes it’s referred to as hyper-saving or hyperopia. What does it look like in a retiree? And you’ve touched on this a little bit, but what does it look like in a retiree who has more than enough money? They’ve oversaved because they were so future focused. What can they do maybe right now if they are that person to maybe get out of this cycle and start to maybe create more balance in their retirement planning?

Hal Hershfield:
This is a really intriguing and also important problem to deal with. So I think to just summarize what you said, I think if you’re so lucky that you’ve saved and you’ve arrived at retirement with a great nest egg, let’s first recognize that it can be really difficult to basically flip the switch the other way. The very things that make somebody a great saver don’t necessarily translate to making them a great spender. If you spent the last 30 to 40 years of your adult life and work and career being a smart saver Sure. Now all of a sudden we’ll go enjoy that money. It almost feels problematic. I think we should also acknowledge that it’s a totally human and reasonable thing to be worried about this. My collaborator, Jeff Brown, has this great way to put it. He says it’s a denominator problem. And what that means is that when you’re saving for retirement, there’s kind of an easy numerator.

You want to save a certain amount. We can aim for it and it makes sense. When you’re then trying to spend in retirement, you know what the numerator is, you know what the money is that you have, but you don’t know how long you have to spend it. That’s the denominator. You could live five more years, you could live 35 more years. And the thing that really prevents a lot of people from spending is that nagging worry that what if I run out of money? Now, I know of course there, and we know this, of course there are products that can help with this. There’s longevity insurance and so forth, but that’s sort of a narrowing on a solution. But I think the bigger picture is a deeper, and it can be difficult, but a deeper conversation with your partner, your advisor, yourself on first off, what are the things that I actually want to do?

What are the values that I have? How do I want to make those things happen? And then translating those things into dollars and cents. So I think the advice I love is let’s first start with the non-negotiables. What am I going to have to spend every year? And these exercises are not exercises that are necessarily fun because you’ve got to sit down. Sometimes it means a realization that, wow, I spent a lot more on gas than I thought I spent on. But once you know that sort of thing, then you can say, “Well, am I thinking I’m taking two trips a year? Am I taking no trips a year? Is it every other year? What are those amounts to? ” We have to recognize that we can never get this perfect, but there’s a big difference between saying, “I’m really worried about how much money I’ll have and as a result, I won’t spend it.

And now I’m depriving my current self of enjoyment and my future self of memories.” There’s a big difference between that and getting my head around what my spending actually might look like, what money I have to spend, what I can expect a conservative rate of return is, spreading that out over time and coming up with a strategy with my advisor if you have one so that I can feel comfortable spending the money that I have. I did talk to one advisor recently who said that he always tells his clients to spend their required minimum distributions on travel. He said, “Just think about that as it’s like you’re spending money.” And then it doesn’t feel like it’s coming from the pot, even though it effectively is, but it doesn’t feel that way.

Taylor Schulte:
It’s kind of forced on you. It’s like this forced distribution. Sure, you could put it in a different account and save it, but it is this forced distribution, money is moving. Why don’t we move it into your travel pile?

Hal Hershfield:
Exactly. And all of this is “mental accounting.” Money’s fungible. The dollar that you put toward the travel could be a dollar that you invested, but from a psychological perspective, it feels like, well, I’m forced to take this, I might as well do something with it. But I think that to wrap that up, I would say the big picture there is to go through the work, to actually think about what you want to spend and when, and work out a plan, but also recognize psychologically that these are difficult decisions, but that if you are constantly planning for the future to make sure that the money is there, you may often end up in a situation where you’ve missed out on a lot of opportunities to give yourself some joy, some utility, some pleasure that could create real lasting experiences.

Taylor Schulte:
You had mentioned earlier, you said, kind of turn this into dollars and cents. And it made me think that a large part of this behavior is having true confidence in your retirement plan. And we say this a lot in the podcasting world, having confidence in your retirement, having clarity in your retirement. We use that. We throw that word around a lot, but really having confidence in your plan. And I think one of the challenges, at least historically, and there’s some trends that are changing these days in practice, is leaning on these Monte Carlo analysis, this percentage just probability of success and how I tell you have a 95% probability of success and you’re like, “Cool, that’s great. What does that actually mean? I mean, there’s a 5% chance my plan fails. What if it drops from 95 to 90? What does that mean?” And so what I’ve found that has worked really well in practice is converting that into dollars and cents.

Based on everything that you shared with us, your plan is very healthy. Sure, we might assign it a probability of success, but then we might say, look, based on everything you’ve shared, you only need $10,000 per month to live, but you could be spending $30,000 per month in retirement. There’s an extra $20,000 there for you to do something with. Sure, you can continue to save it and invest it. You could give it to charity, you could help your children out, you could travel more, but converting it to dollars and cents to me seems to give that person a lot more confidence to spend rather than a percentage. And then I think the second part of this confidence thing is it’s an ongoing conversation. You might have one year of feeling confident and then at the end of the year like, “Okay, that was fun. I felt good, but what about next year?” These conversations need to be fluid and ongoing to continue to give that person confidence to spend that money and enjoy the present.

Hal Hershfield:
The translation that you’re talking about there makes so much sense. And let’s acknowledge that probabilities are difficult for people, period. And I’m not saying, “Oh, as long as you have an advanced degree.” No, it’s like even any level of degree, probabilities are just not the way that we reason regularly or rather the way that they’re presented to us aren’t. We do reason in probabilities and say what’s the general likelihood, but I can’t really understand the difference between 95% and 90%. It’s in the same way that when I see a weather forecast that there’s a 40% chance of rain versus 60% chance of rain, how do I really interpret that? It might rain. And that’s like part of what I hear when you tell me 95% chance is like, I might run out of money even though it’s so unlikely.

And so I think part of what you’re doing there is going from the sort of abstract and vague to the concrete and that is definitely what the research would suggest is a smart idea. Another way you can think about this is to say, well, okay, what are we going to do to protect if we happen to be so unlucky to arrive at one of those five times out of a hundred? What would that actually mean? Let me be clear. It doesn’t mean that you are going to be kicked out of your house. What we think that means is that there are going to be several months where what you’re going to be able to do is live in your house, but you’re not going out to fancy restaurants, you’re not traveling those, whatever. And obviously the individual scenarios will be different, but even in other words, what I’m suggesting is you go beyond just saying this means that you have $10,000 a month or $30,000 a month. So what do those amounts actually mean from a lifestyle perspective? Because I think that then even becomes more concrete.

Taylor Schulte:
It means maybe you’re not flying first class this year, you’re going to fly coach and we’ll revisit this next year.

Hal Hershfield:
Yeah. And I talked to Alicia Munal is the director of the Boston College Center for Retirement Research. And for a couple of decades now, they’ve been studying this thing called the National Retirement Risk Index. They’ve been trying to analyze the percentage of households that won’t be able to meet their retirement goals. And I know a lot of people here have probably met their retirement goals, but there’s something interesting about this, which is that they find out 65% of households are on track, but that means that there’s 45 that aren’t 35 that aren’t. And she said, “But the interesting sort of paradox is that a lot of people are pretty happy in retirement, even if they didn’t meet their retirement goals.” Okay, well, what does that mean? She said, “Well, there may be a lot of people who are happy in retirement. They’ve made do with what they have, but they also have to make certain decisions.

Now they have to decide, do I run my heat tonight or not? ” And this is an extreme example, but you could say, “I’m happy. I’m seeing the people I love. I’m playing Mahjong or Bridge or whatever it is, but I do have to decide about the heat. I’m going to make this one meal last for lunch ending or whatever it is. ” And again, I’m being extreme, but the point is that that’s a very concrete representation of what it means not to meet your goals. And it’s not to say that life will be miserable. People are really good at adapting. We’re really good at being able to bounce back when we think we can’t, but if we can prepare ourselves to actually have a lifestyle, have a retirement that maps onto what we want it to be, let’s try for that instead.

Taylor Schulte:
To bring us home here, Hal, I’m personally curious, what has surprised you the most as you’ve been on this journey of life and your career and academics and studying and do this research on long-term decision-making and behavioral finance, what’s surprised you the most through all the work that you’ve done?

Hal Hershfield:
Okay. One of the things that surprised me along the way was, I mean, I’ll make this about my own sort of introspection that I really started this work thinking, man, not enough people are doing enough for their future selves and we should be prudent. And it occurred to me at some point, and actually I live in LA. One of my best friends here, he’s a producer and I was explaining this to him and he said, “This is a terrible story you’re telling.” He’s like, “I don’t want to buy that. ” And I was like, “Well, tell me more.” He’s like, “The idea that I’ve got to do things for my future self and I can’t do things now, nobody wants to hear that. ” And I thought, wait, wait, actually, this is really interesting because that’s not the message that I meant to put out there.

The message is create a better relationship with your future self. Sometimes it makes sense to lean in now and spend the money or take off the time from work, whatever it is, and sometimes it makes sense to pull back. And I thought that was obvious and I clearly didn’t make it obvious. And I think in my own life, especially as a parent with kids, I went from the mindset of I need to work. I need to work hard. Sometimes that means sacrificing. Sometimes I’m going to be working long hours. Sometimes I’m going to go on a trip for work too, and I’m clearly fortunate to be able to say this and I know not every job or every person’s able to do this, but I’ve been lucky to say, “Well, you know what? I got an opportunity to, for instance, coach my kids’ softball and baseball teams.

And it means leaving work at 30 on Fridays. There’s going to be other days where I have to leave early.” And I had been in the mindset of, this is really cutting into my work. I need to work. That’s the stuff that keeps me going in the future. And then realize, ma, it would be so dumb to miss out on this opportunity that I have just because the one perspective is better quote unquote for the future. And that to me was the most surprising shift is to recognize when to just live for your present self in a way, which by extension can be for the future self. And also at the same time, if I stopped working, I was like, well, I’m going to constantly be around. I’ll be volunteering for every school thing. I’m going to be on every field trip. I’m going to be going to a cafe and reading today.

I think that would come back to bite me later if I sort of … I mean, I know it would. And so I think if anything, it’s balanced, maybe I don’t know if balance is the right word or some sort of harmony between now and later, but that was the surprising thing was recognizing how I had gotten the messaging around that wrong and how I myself hadn’t really internalized it until I started trying to put the story out there for others.

Taylor Schulte:
Fascinating. I really appreciate you sharing that, Hal, and I appreciate all of your contributions to the financial planning community, all the work that you’ve done, the research, and I appreciate you coming on today and sharing your knowledge with my audience. So thank you very, very much.

Hal Hershfield:
It is absolutely my pleasure. Thanks for the conversation, Taylor.

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